Banks win at expense of poor
Nov 20 2009 16:57
Johannesburg - South African commercial banks are benefiting from current monetary policy and high interest rates are "throttling" the poor, the country's communist party chief said on Friday.
The ruling African National Congress is under increasing pressure from its allies in the South African Communist Party and the Cosatu trade union federation to introduce economic policies that help the poor.
"The major beneficiaries of the monetary policy in the past have been the banks. They have been making a killing. Yet the very same banks are not investing back," SACP secretary general Blade Nzimande told Reuters.
The central bank has cut its repo rate - at which private sector banks borrow rands from the central bank - by 5 percentage points to 7.0% between December 2008 and August to stimulate an economy that is in its first recession since 1992.
But despite the rate cuts, consumer spending is depressed and credit growth weak as households and company balance sheets remain under stress. Banks have also been criticised for high banking fees.
Nzimande, who is higher education minister in Zuma's cabinet, said in an interview that the SACP was concerned that the country's central bank was perceived to be a private bank with no representation from outside the bank on its interest rate-setting Monetary Policy Committee.
"We are worried that what we call the Reserve Bank is not a state bank, it's a private bank," he said.
"You get all those private people who are sitting in that monetary policy committee with no input from anywhere else either than from amongst themselves - that's what we have a problem with".
The ANC, SACP and Cosatu agreed at a summit last weekend to look at broadening the mandate of the Reserve Bank beyond only controlling inflation.
"We have also allowed a policy where monetary policy has determined our economic priorities and it should have been the other way around," Nzimande said.
The communists and labour are demanding that inflation targeting be scrapped and the central bank focus on job creation after a million jobs have been lost so far this year.
With South Africa in the midst of its first recession in over a decade, Nzimande called for the government's institutions and policies to reflect a "growth and development" agenda.
He said despite black South Africans having political freedom, the country still had an economy dominated by whites.
"The biggest problem is that we have political freedom in the context of a colonial type economy, that has got to change".
"We are dominated by monopolies, we are an extractive economy that exports minerals. We are still dominated by the same white capitalist class," Nzimande said.
